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Better grip on risk needed NEW
November 2011

It is important that organisations strive to get a better grip on overseeing the risks their businesses face, says David Landsittel, chair of COSO, the corporate governance thought leadership body.

“Both management and board members are not satisfied with board oversight of risk management and, as a result, pressure is mounting from regulators and others to continue to enhance board oversight processes”, Landsittel said, speaking at the ECIIA annual conference in Madrid in 2011.

“Board directors are sometimes over-confident about the way they view risk management and internal control, resulting in overlooking risks that could have a significant impact,” he said.

Landsittel noted that COSO has published and will continue to issue “thought papers” with a goal of helping organisations move their risk management processes up the “maturity curve” and will release an exposure draft of a proposed update to its internal control framework soon.

“Good risk management and internal control are the necessary for the long-term success of all organisations and internal audit is the last line of defense to ensure global assurance on internal governance to the corporate boards”, commented Richard Chambers, President and CEO of the Institute of Internal Auditors, speaking at the ECIIA conference.

Chambers said that a more stable model of corporate governance was beginning to emerge.

“We are starting to see boards hold the chief executive officer and management to account more strongly. Internal audit is playing a role in supporting the board in that move”, Chambers said.

Landsittel’s and Chambers’ views echo the European Commission’s recent efforts to improve the long-term viability of listed companies by encouraging better corporate governance. In its most recent consultation document, The EU Corporate Governance Framework, the EC focused on how corporations should manage and report on risk following recent financial and economic crises.

For the full conference report click here.

Balancing risk and audit NEW
November 2011

Internal auditors do not want to step on the toes of risk managers, so their respective roles need to be properly defined.

Internal auditors, as much as other risk professionals, are gaining stature in European companies, but they do not want to step on the toes of risk managers, according to ECIIA past president Carolyn Dittmeier.

Speaking in an exclusive interview with Commercial Risk Europe, she urged companies to clearly define the roles of each risk control activity in order to avoid confusion between the functions.

Dittmeier said: “Risk managers and internal auditors speak a lot to each other and there is no overlapping of their functions. They all want the first level of protection to be working, so they are working on common objectives.”

But she conceded that there are still cases where the functions are not clearly defined and synergies were not always well developed. “Internal audit has no desire to encompass the risk management function,” she said. “But there can be some transitional confusion, and we need to promote clarity of roles.”

She said that internal auditors had made some ground in their companies during the recent financial and economic crises. But they still had some way to go to make boards more aware of the need to properly manage risks, she added.

Read the full feature.

Not seeing risks
October 2011

One of the biggest risks that audit committees and boards face is the risk of not seeing the threats in front of them until it is too late, according to an ECIIA paper.

The oversight role of the audit committee includes asking management the right questions to be assured that risk management processes and internal control systems have been fully considered in the strategic and business planning processes and operations, says the paper.

Insight and Oversight: Guidance for Audit Committees on Governance Oversight, poses a series of questions to help Board members and Audit Committees reflect upon their oversight roles.

Download the paper.

Internal audit should provide “overall assurance” in EU governance
July 2011

Internal audit’s role is to provide overall assurance within the European Union’s corporate governance framework, the ECIIA says in its response to the EU Green Paper on the subject.

It argues that this is in line with the recommendations of the Basel Committee and with existing best practice among all types of businesses.

Internal audit should “be fully taken advantage of in order to monitor potential conflicts of interest or inconsistences or inefficiencies between control functions such as risk management or compliance and operational units,” it says in its response.

Given the wide variety of methods available for managing risk, the ECIIA says that it would be useful for the EU to recommend companies to adopt a suitable one and disclose to shareholders the framework they had chosen. It said methods such as those put forward by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) were well known and understood.

The Confederation also says in its response that the Three Lines of Defense model of corporate governance provided the best explanation of the risk management and assurance responsibilities of management, risk and internal audit.

Click here for a copy of the response.

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